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The recession of 2013 could be the mildest on record, and last no longer than the six-month downturn of 1980. Or it might take the form of a "growth recession," in which growth occurs, but at such a sluggish pace, the unemployment rate trends back up in response.

Such are the likely alternatives if policy makers do nothing before the first of the year to avert the fiscal cliff. If a deal is struck by the first quarter of next year, even a growth recession might be avoided, with the economy suffering a first-quarter slowdown before rebounding the following quarter.

A game of chicken between President Obama and House Speaker John Boehner and predictions of default by Treasury Secretary Geithner have pushed fiscal cliff anxiety to a fever pitch. But we've been here before -- four times, in fact -- and it hasn't been a disaster.
Andrew Harrer/Bloomberg News

All of these alternatives are grim, especially against the background of already-sluggish growth and a jobless rate that's already too high. But there is no reason at this point to make them sound grimmer. While it's understandable that Fed Chairman Ben S. Bernanke would use the phrase "fiscal cliff" as a way to zap policy makers into behaving responsibly -- and predictable that media that thrive on sizzle would pick up those words -- the metaphor is overkill. Even the more accurate phrase, "tax shock," as Barron's has characterized it, overstates the likely harm to the economy.

Treasury Secretary Timothy F. Geithner warned last week that the federal government might have to default on its bills if its legal borrowing limit isn't raised. Such a massive default would indeed seem like falling off a cliff, and would certainly be shocking. The assumption here is that this particular cliff will be averted, with government finding a way to resume borrowing.

We are mainly talking about huge tax hikes whose impact will be phased in over time: damaging, for sure, but less like falling off a cliff than slipping down an incline.

CONTRARY TO WIDESPREAD BELIEF, the so-called fiscal cliff has happened before. Cliff notes on those precedents are instructive.

Technically, the cliff consists of a fiscal tightening, the opposite of a fiscal stimulus -- if stimulus from one year to the next is supposed to boost economic growth, then a fiscal tightening should slow it down. Over the long run, deficit reduction should be the goal. But it can be disruptive if the fiscal tightening is too great in a single year.

How much is too great? Based on estimates by the Congressional Budget Office, the deficit as a share of nominal gross domestic product is due to fall from 7.3% this year to 4.0% next year, a decline of 3.3 percentage points. A deficit reduction can come from an increase in revenue or decrease in spending, or a combination of the two. In this case, the decline is overwhelmingly due to an assumed increase in revenue from tax hikes rather than spending cuts. In fact, the mandated spending cuts, should they come to pass, will be more than offset by the increase in spending on entitlements; on net, federal spending will rise a bit in dollar terms.

Looking back at the years since World War II, nothing remotely compares with the fiscal tightening that occurred in 1946 and '47. Despite warnings at the time from Keynesian economists about an imminent depression, the deficit as a share of nominal GDP fell to 7.2% of nominal GDP in '46 from 21.5% the year before, a tightening of 14.3 percentage points. And to add insult to economic injury, that 7.2% deficit turned into a surplus of 1.7% by '47, after a further tightening of 8.9 percentage points.

Those 14.3 and 8.9 percentage-point tightenings make this year's 3.3 points look like chump change. And yet no recession occurred in 1946 or '47.

Those anomalous outcomes have proved so embarrassing to the Keynesians that a cottage industry has sprung up to explain them away. The only thing we might note is that, contrary to this time around, the 1946 and '47 deficit declines were entirely due to massive spending cuts, which were large enough to offset declines in tax revenue.

Setting aside the years just following World War II, what about the period since 1950? We found three cases of comparable fiscal tightening from one year to the next: 1951 (3.0%), 1960 (2.7%) and 1969 (3.2%). In each case, spending cuts and tax increases operated in about equal measure. In the last two cases, a recession occurred, both lasting less than a year, and both relatively mild.

But in both 1960 and '69, the recession was also preceded by conventional monetary tightening: a rapid hike in the short-term interest rate targeted by the Federal Reserve. That action, famously described as "tak[ing] away the punch bowl just as the party gets going," is classically associated with sparking recession. As for 1951, short-term interest rates also rose, and no recession resulted.

Since the Bernanke Fed has made it abundantly clear that it will continue to set records for loose monetary policy, this should shed doubt on the danger that the U.S. economy really will fall off a cliff.

OF COURSE, THIS TIME MAY BE DIFFERENT. On the worrisome side, this time the fiscal tightening consists almost entirely of tax hikes. As Barron's noted last week ("Fiscal Cliff and IRS Slow the Economy," Dec. 24), this time there is turmoil at the IRS, with more than $200 billion in refund checks normally sent out in the first quarter that might be delayed.

That said, all of the incessant warnings about the fiscal cliff may be one reason personal saving has recently increased, perhaps in preparation for the tax hikes. And despite the collapse in asset values during the great recession, household net worth as a share of income is actually much higher than it was in years prior to 1970, leaving households better prepared.

Is the economy really about to fall off a cliff? Regrettably, we may soon find out.